PEER COMPANIES

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PEER COMPANIES

HUL is a great opportunity for everyone to participate, says Hemang Jani, Equity Strategist & Senior Group VP.

GSK is planning to sell close to 6% stake via a block deal in HUL today. What is your opinion about the valuations and the transaction?It is a big trade given the fact that HUL has corrected almost about 25% from the top and there are not many ideas and opportunities that one can really put their hands on because of the evolving situation around. So whenever you see opportunity in a marquee name that has corrected, I am sure there is going to be more buying appetite both at the institutional level as well as at the retail level.

However, the numbers this quarter from HUL were not that impressive and probably it will take some time for the volume growth to come back. But, given the kind of positioning that HUL has and the consumption story beyond six months or nine months, it will definitely come back. So this looks like a big opportunity for investors.

In terms of valuations, it is quoting at about 48 times FY21 earnings and 43 times FY22 earnings. But in the current market when there are very few pockets where there is a comfort, we should look beyond the PE multiple. We should look at something where there is comfort and there is going to be a margin of safety and eventual growth. So from that perspective, HUL definitely fits the bill and is a great opportunity for everyone to participate.

I am just looking at CLSA's latest note on pharmaceuticals. Aurobindo Pharma continues to be a buy; it is their old rating as well. Biocon was a sell and continues to be a sell. Cadila is a buy and was a buy earlier as well. Abbott from the earlier buy now becomes an outperformer. What in your mind is looking attractive within pharmaceuticals?There is going to be a lot of increased allocation to the pharma sector because of the way things are unfolding and the sector is really coming out of a three-year base formation. So definitely, the entire sector would go through an increased allocation and within the order, companies like Cipla, Sun Pharma, Lupin are the ones which we think are better placed because some of them had those FDA-related issues and even in the domestic market, we are seeing that there is some sort of stability which is coming through. So overall, some of these names would continue to have a lot of space for the individual portfolios.

Overall, for the next couple of years, things are looking good. The best thing is that some of these companies do not have any sort of debt and even if they have gone up in the last three to four months, when you look at the valuations and the overall marketcap and the representation in the index, it is pretty okay. It is not as if that they have really gone up too high. So barring a little bit of volatility here and there, the pharma story is here to stay and we should really look at increasing the allocation over there.